| INCOME TAXES |
NOTE 6 – INCOME TAXES A reconciliation of the expected federal income tax expense to the income tax expense included in the consolidated statements of income is as follows for the three and six months ended June 30, 2026 and 2025: | | | | | | | | | | | | | | | | | | | | | | | | | | For the Three Months Ended June 30, | | | For the Six Months Ended June 30, | | | | | 2026 | | 2025 | | | 2026 | | 2025 | | | | | | | | % of | | | | | % of | | | | | | % of | | | | | % of | | | | | | | | Pretax | | | | | Pretax | | | | | | Pretax | | | | | Pretax | | | | | Amount | | Income | | Amount | | Income | | | Amount | | Income | | Amount | | Income | | | | | | (dollars in thousands) | | | (dollars in thousands) | | | | | | | | | | | | | | | | | | | | | | | | | | | U.S. federal statutory tax rate | | $ | 8,291 | | 21.0 | % | $ | 6,420 | | 21.0 | % | | $ | 15,811 | | 21.0 | % | $ | 11,902 | | 21.0 | % | | State and local income taxes, net of federal income tax effect (*) | | | 1,059 | | 2.7 | | | 896 | | 2.9 | | | | 2,088 | | 2.8 | | | 1,344 | | 2.4 | | | Tax credits | | | | | | | | | | | | | | | | | | | | | | | | Low income housing tax credits | | | (1,017) | | (2.6) | | | (822) | | (2.7) | | | | (2,038) | | (2.7) | | | (1,512) | | (2.7) | | | Other credits | | | (47) | | (0.1) | | | 60 | | 0.2 | | | | (96) | | (0.1) | | | (135) | | (0.2) | | | Nontaxable or nondeductible items | | | | | | | | | | | | | | | | | | | | | | | | Tax exempt income, net | | | (7,531) | | (19.1) | | | (7,960) | | (26.0) | | | | (14,989) | | (19.9) | | | (15,465) | | (27.3) | | | Interest disallowance | | | 2,805 | | 7.2 | | | 3,327 | | 10.9 | | | | 5,721 | | 7.6 | | | 6,442 | | 11.4 | | | Bank-owned life insurance | | | (234) | | (0.6) | | | (210) | | (0.7) | | | | (410) | | (0.5) | | | (320) | | (0.6) | | | Meals and entertainment | | | 38 | | 0.1 | | | 25 | | 0.1 | | | | 65 | | — | | | 46 | | — | | | Other | | | (273) | | (0.7) | | | (149) | | (0.5) | | | | (403) | | (0.5) | | | (291) | | (0.5) | | | Changes in unrecognized tax benefits | | | 204 | | 0.5 | | | — | | — | | | | 369 | | 0.4 | | | — | | — | | | Other adjustments | | | | | | | | | | | | | | | | | | | | | | | | Excess tax benefit on stock options exercised and restricted stock awards vested | | | (101) | | (0.3) | | | (37) | | (0.1) | | | | (685) | | (0.9) | | | (527) | | (0.9) | | | Provision adjustment | | | 11 | | — | | | — | | — | | | | 153 | | 0.2 | | | 373 | | 0.7 | | | Other | | | 22 | | 0.1 | | | 2 | | — | | | | 69 | | 0.1 | | | 3 | | — | | | Effective tax rate | | $ | 3,227 | | 8.2 | % | $ | 1,552 | | 5.1 | % | | $ | 5,655 | | 7.5 | % | $ | 1,860 | | 3.3 | % | | | | | | | | | | | | | | | | | | | | | | | | | | * State taxes in Iowa made up the majority (greater than 50 percent) of the tax effect in this category. | | | | | | | | | | | | | | | | | | | | | | | |
The effective tax rate for the first six months of 2026 was at 7.5%, up from 3.3% in the first six months of 2025. The increase was primarily due to an overall increase in pre-tax income. The following table summarizes the impact to the Consolidated Statements of Income relative to the Company’s tax credit programs for which it has elected to apply the proportional amortization method of accounting: | | | | | | | | | | | | | | | | For the Three Months Ended | | For the Six Months Ended | | | | June 30, 2026 | | June 30, 2025 | | June 30, 2026 | | June 30, 2025 | | | | | (dollars in thousands) | | (dollars in thousands) | | | | | | | | | | | | | | | | Tax credits recognized | | $ | 2,942 | | $ | 2,587 | | $ | 5,884 | | $ | 5,295 | | Other tax benefits recognized | | | 435 | | | 492 | | | 862 | | | 988 | | Amortization | | | (2,247) | | | (2,191) | | | (4,480) | | | (4,384) | | Net benefit included in income tax | | | 1,130 | | | 888 | | | 2,266 | | | 1,899 | | | | | | | | | | | | | | | | Other income | | | — | | | — | | | — | | | — | | Allocated income on investments | | | — | | | — | | | — | | | — | | Net benefit included in noninterest income | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | Net benefit included in the Consolidated Statements of Income | | $ | 1,130 | | $ | 888 | | $ | 2,266 | | $ | 1,899 | | | | | | | | | | | | | | | |
The Company did not recognize impairment losses resulting from the forfeiture or ineligibility of income tax credits or other circumstances during the three and six months ending June 30, 2026 and 2025.
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